The wind-down of Woodford Equity Income is being called into question as a Link-commissioned review shows investors are set to lose 32.5% from their investment during the process in a base case scenario.
The authorised corporate director tasked PJT Partners, the investment bank selling off unquoted holdings in the fund, with conducting the analysis. Blackrock is responsible for selling the quoted part of the portfolio.
The losses could hit 42.6% in the worst case scenario.
Woodford Investment Management had prepared a presentation for Link stating investors would face losses of 9.3% as it repositioned the portfolio to improve liquidity. It never gave the presentation and was instead blindsided by Link’s decision to wind-up the fund.
Questions raised
Willis Owen head of personal investing Adrian Lowcock said the figures raise questions over whether Link acted in the best interests of investors by closing down the fund.
“At the time Link felt they had little choice because they had no clarity on how long the fund would need to remain closed for, but with the prospect of such a hefty loss overall, it is unlikely they have won any fans among investors who are so deeply out of pocket,” Lowcock said.
The estimates should be taken seriously given they come from a review commissioned by Link, he said.
“Given these estimates are over and above what investors have already lost through the under-performance of the fund, it could mean investors’ overall see their investment shrink by even more than this.”
Best interests
Link said its role as ACD is to work in the best interests of investors and it’s aim is to avoid a “fire sale” during the wind down of the fund.
A spokesperson said in a statement: “Following the suspension, insufficient progress on the repositioning of the fund meant there was not reasonable certainty when this repositioning would be fully achieved and LFS therefore concluded that it is in the best interests of all investors for the fund to be wound up on the basis of an ‘orderly realisation’ of the fund’s assets.
“This involves the sale of the fund’s assets over a reasonable period of time – the aim is to avoid a “fire sale”, balancing the need to generate liquidity and the need to secure a reasonable value for the assets.”
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